The easyJet (LSE: EZJ) and IAG (LSE: IAG) share prices have both seen significant declines since the beginning of the coronavirus pandemic. Since early February 2020, the EZJ share price has fallen around 34%. Meanwhile, shares in British Airways owner IAG are off around 50%.
However, I think both of these airlines could provide attractive ways to invest in the global economic recovery over the next few years. But if I had to pick just one company to buy for my portfolio, which stock would I choose?
IAG share price challenges
Easyjet and IAG are both very different companies. The latter owns a portfolio of airlines across Europe, which cater to different customers and fly to different locations. I think this diversification is appealing from an investment perspective.
On the other hand, EZJ owns and operates one of the most efficient, low-cost airline brands in Europe. Its balance sheet is more robust than its larger peer, and it’s far more efficient.
What’s more, its low-cost offering may appeal to consumers over the next few years as in periods of economic stress, consumers tend to favour goods and services with lower prices.
So, easyJet has the edge when it comes to pricing. Further, the business is far more flexible than its larger peer, and it has a stronger balance sheet. A weak balance sheet is one reason why the IAG share price has performed so poorly this year.
For example, earlier this week, it was reported that IAG would reevaluate its position at Gatwick Airport. A current waiver on slot usage has allowed BA to avoid penalties for not launching flights from Gatwick over the last 18 months. That will expire at the end of 2021.
Therefore, management is reportedly considering consolidating operations at Heathrow. Meanwhile, EZJ has recently decided to add 12 new UK domestic UK routes and five new European routes from Birmingham. The company also has plans in place to expand its Gatwick presence.
While IAG is also launching more flights from smaller UK airports, it’s notable the group is leaving one of its major bases while easyJet expands.
EZJ opportunity
Considering all of the above, if I had to choose between IAG and easyJet, I would buy shares in the latter. I think it’s better managed and has more room for growth in the years ahead.
That being said, the success of both companies over the next few quarters depends on current government travel regulations. Unfortunately, travel regulations seem to change almost every week. The industry is awash with rumours about what will happen next.
There’s also a high level of uncertainty regarding how long it will take for the industry to return to 2019 levels of activity, let alone grow beyond that. If consumers don’t return quickly, both companies may struggle. But I think easyJet is better placed to navigate a challenging environment due to its operational flexibility.
Overall, I would avoid IAG shares and acquire easyJet for my portfolio if I had to choose between these two recovery plays.
